Hotel Purchasing Management Strategies

This assignment delves into effective purchasing management strategies within the hospitality industry. It emphasizes the significance of selecting suitable suppliers, employing various criteria for evaluation (like price competition, market prices, and historical data), and ensuring fair and reasonable pricing. The role of IT in streamlining purchasing processes and fostering cost-effectiveness is also highlighted.

Running head: PURCHASING MANAGEMENT 1
Purchasing management
Student’s name
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Introduction
This essay discusses the purchasing management of Singapore International Hotel
located at the heart of the city. The essay will focus on analyzing the efficiency of the
features of purchasing management; that is the criteria for supplier selection criteria
issues related to it, and recommend appropriate criteria to be considered; use of
information and communication technology for purchasing procedures and discuss on
issues of purchasing costs analysis. At the end of the essay, a summary will be outlines
on the key points derived from the analysis of the three aspects discussed.
Singapore International Hotel is a five star hotel offering services in the hotel sand
hospitality industry. It serves both local customers and international customers who
come to Singapore for business or as tourists. The hotel offers a range of services to its
customers including boarding and meal services, recreational facilities and conference
facilities to its clients. The hotel has various branches located in other localities in the
country. Our supplier market has a wide range from those supplying products to those
who offer services to the hotel. The products suppliers provide goods such as
vegetables, meat and meat products such as beef, mutton, pork, and chicken meat
among others, beverages, milk and a range of food stuff. The service providers include
those who provide car/bus hire services to our client and internet providers. Our main
competitors are other five and three star hotels within the city who offer more or less the
same services as we do. Our organizational goals are to provide the best hotel
experience for our local and international customers. The organizational strategies
include ensuring that there is customer satisfaction through provision of services that
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meet the expectations of the customers and making sure that we improve on our
services on a day to day basis.
Supplier selection criteria and issues
Selection of supplier is among the utmost critical parts of the procuring role of an
organization (Florez-Lopez, 2007). It is a tactical choice when the procurement
department wants to form lasting relationship with its suppliers where they both benefit.
Firms are becoming progressively more reliant on suppliers to provide the services and
supply products. The process of selecting suppliers is a crucial area that needs to be
addressed for a better purchasing process (Ying, 2000). Selecting the right decision
making criteria together and correct method for making decision is critical in finding the
correct suppliers.
The assessment of supplier encompasses ranking the value of the supplier by gauging
the supplier’s competence and performance. For supplier selection, there is a clear set
of criteria by those making the decision to assess the efficiency of potential contractors
in the earlier and present contracts. It assists those making the decision to position by
ranking the suppliers they prefer.
There are issues that are encountered when selecting suppliers. These issues include
increase in the number of suppliers, challenges in identifying and defining the selection
parameters for the suppliers. On occasion, the decision-makers have to make decisions
using data that is incomplete. The matter of the number of suppliers is used for apiece
item bought is also another problem (Wisner et al., 2005). When using a single sourcing
approach, suppliers are measured as able to satisfy the purchaser’s requirement (Xia
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and Wu, 2007). Buyers just make one choice on who is the best supplier. Multiple
sourcing requires the buyers decide who the top suppliers are thereby the size of
purchase request to be given to every one of the selected supplier.
The recommended supply selection criteria for the organization are briefly discussed
below. The prevailing factors when considering any suppliers are price, quality and
delivery. Suppliers need to be in a position to meet specifications for quality and have a
stated schedule for delivery at a price that is reasonable. The other factors for selection
are professionalism, commitment, integrity, economic and political situations, flexibility
and reliability
Geographical location is also used as a criterion for supplier selection since it would
define if the purchase management will involve a resident or international dealer. This is
especially important if having business with foreign vendors particularly with issues of
tariff and trade barriers.
Performance and capability are the two important measurements of the ability of the
suppliers (Sarkar and Mohapatra, 2006). Past performance of suppliers is also used to
evaluate the suitability of the supplier and this is used as a reference line to avoid any
supplier who does not perform being given any contracts in the future. The selection
criteria for suppliers also include the way the supplier’s firm is managed and organized;
the organizational arrangement and attitude of the management provides the purchaser
a guarantee of its sustainability. Also the financial status of the supplier must be
evaluated since a good fiscal situation of the provider assures the purchaser of the
sustainability of the provider through the entire period of the projected supply.
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Information and communication technology (ICT) for purchasing operations
Currently, increasingly additional food provision processes have been computerized by
using computers. Purchasing computer system lets firm to improve organizational
power in terms of spending and regulate the processes of purchasing. Procurement
software aids the hotel by decreasing inadequacies and needless expenses associated
to methods of purchasing.
An information and communication technology (ICT) system than is well-functioning can
aid firms to the achievement of maintainable competitive advantage. It can aid firms
improve the quality of their product and service while reducing the cost at the same
time. The hotel industry sector product is perishable and has to be consumed when it is
set to be served; hence the services should be provided at the same time with the
demand. The strong competition in business setting today shows that the hotel
businesses must work harder to keep and grow their competitiveness. A good
information and communication technology system aids a hotel firm to classify its
relations with its most essential suppliers. It offers the users with established built-in
monitoring tools to aid regulate expenses and guarantee full performance of the
supplier. It offers a structured system to retain an open communication line with
prospective suppliers during a purchasing process. The ICT system permits purchasing
managers to confirm the price setting, and control earlier contracts to guarantee every
new pricing quotation is more competitive compared to the last quote.
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Therefore the hotel can achieve tremendous benefits from IT. Computer applications
increase the competitive advantage of the hotel relative to the competitors. IT also gives
the hotel an opportunity to become independent of mediators and promote its own
facilities. It enables the hotel advance the quality of services they provide (Baines,
1998). Through Computer applications, the business of the hotel is open for 24 hours a
day at the lowest cost. Many of the hotel’s purchasing processes are automated by use
of computer applications.
The advent of the internet has given the purchasing departments of hotels an
opportunity for reducing costs and improving their services such as ability to pay
invoices electronically, and be able to respond to suppliers problems well. The
relationship between the supplier and the purchasing department is also improved
through the use of internet by improving communication between them.
Some of the concerns associated with the use of IT fully by hotels are the lack of IT
knowledge and experience, absence of training, lacking financial resources. The other
major barriers to adoption of IT by firms are restricted access to principal funds,
inadequate applications of technology proficiency and absence of trade and computer
technology strategy (Mark, 2001). The purchasing departments need to be run as per
the type of the goods or service that is provided (Fisher, 1997).
The purchase department need to adopt the E-procurement since it has several benefits
such as cost reduction through different ways as improvement in the internal efficiency,
cutting down supplier cost, order error rate reduction and minimize excess purchasing
(Croom and Brandon-Jones, 2007).
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Purchasing cost analysis
The Hotel needs to do cost analysis to ensure that we do not spend much money on
acquiring goods or services from the suppliers. Cost analysis is done whenever a fair
and reasonable price is not given by the price. Cost analysis aims at assessing if the
cost of the supplier is on track with soundly inexpensive and effective performance
ought to charge. The means of conducting cost analysis is the cost data given by the
supplier. It offers actual information on the costs the supplier states might be used in
executing the contract (Dumond, 1994).
Cost analysis methods are used to divide into components such as equipment, labor
costs, materials’ costs and overhead of the supplier to confirm and assess each
constituent. These costs can be used to compare it with the costs that were actually
earlier incurred for related work; what other suppliers have availed and independent
breakdown of cost estimation (VITA, 2016).
There are some criteria the purchasing manager uses to prove that the price the Hotel
is paying is reasonable and fair. These criteria are; (1) if the hotel is getting some type
of discount, (2) if the hotel is being charged the same like the supplier would charge
another hotel, (3) to check if the price charged currently compare to what was charged
for same service or goods.
Cost analysis is performed any time no competition in price exists. It is done when
discussing a contract with one supplier who is the sole supplier of the goods or services.
Cost analysis is also carried out if in the course of a competitive closed bidding the
procurement team receives only a single bid that is considerably different from the
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hotel’s independent estimation of the agreement charge. A breakdown of the cost from
the single supplier is then attained, analyzed and the reasonableness of the price is
determined (VITA, 2016).
The recommendation for the hotel is to use the different tools for assessing if the prices
offered by the suppliers are fair and reasonable. These tools are; (1) Price competition:
When the hotel receives more than one offer that are acceptable and the prices that is
the lowest is selected, then the lowest bidder price is presumed fair and reasonable. A
very low price need to be counter-checked to make sure that the supplier knows what
he is vending no errors was made, (2) Market prices: Where a good or service has an
well-known confirmation of an equivalent or lesser price, the price is considered fair and
reasonable and (3) Historical prices: when the hotel has been buying the good or
service for some years, the information is used to conclude if a price is fair and
reasonable.
Conclusions
There is need to carry out a thorough selection of the suppliers who will be used to
supply the goods and services needed in the hotel. The availability of different criteria
for doing the selection need to be used to come up with the right combination of criteria
that suits the hotel industry. Using IT in the hotel purchasing department is crucial to
ensure the flow of data and the relationship between the suppliers and the purchase
department. This will ensure profitability and cost cutting for the hotel. The purchasing
manager and procurement team need to analyze the cost or the price the hotel pays the
services provided and goods delivered. Fair and reasonable price is not automatic from
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the offer that is the lowest. Price analysis or cost analysis is done to asses if the price is
fair and reasonable.
References
Baines, A. (1998). Technology and Tourism. Work Study, Vol.47 No. 5, PP. 160–163.
Croom, S. and Brandon-Jones, A. (2007), Impact of e-procurement: experience from
implementation in the UK public sector.
Dumond, E.J., (1994), Moving toward value-based purchasing, International Journal
Fisher, M. (1997). What is the Right Supple Chain for Your Product?. Harvard Business
Review, PP.105–116.
Florez-Lopez, R. 2007. Strategic supplier selection in the added-value perspective: A CI
approach. Information Sciences, 177(5): 1169-1179.
Mak, S. (2001). A Model of Information Management for Construction Using Information
Technology, Automation in Construction. Elsevier, UK, Vol.10 No. 2, PP. 257–
263.
Sarkar, A. and Mohapatra, P.K.J. 2006. Evaluation of supplier capability and
performance: A method for supply base reduction. Journal of Purchasing and
Supply Management, 12(3): 148-163.
VITA (2016). IT procurement policy manual. Chapter 09 - Determining Fair and
Reasonable Pricing - V3.0 2016
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Wisner, J.D., Leong, G.K. and Tan, K.C. 2005. Principles of supply chain management:
A balanced approach. USA: South-Western, Thompson.
Xia, W. and Wu, Z. 2007. Supplier selection with multiple criteria in volume discount
environments. Omega The International Journal of Management Science, 35(5):
494-504.
Ying, F. 2000. Strategic outsourcing: Evidence from British companies. Marketing
Intelligence & Planning, 18(4): 213-219.
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